Early this morning (Saturday), while on a mission to place my lawn sprinkler on the part of my lawn that has been feeling the heat, I noticed my elderly next-door neighbor sitting on her front porch. I went for a visit, and a friend from across the street soon joined us. The dysfunction in Washington came up in conversation (raised by someone other than me, I swear). So I thought I might try explaining why we ought to engage in more, not less, deficit spending immediately. You know what? It did not go well. I made no headway persuading these reasonable and moderate Republicans — Tea Partiers they are not — that the wisest course now is for the Federal government to stimulate the economy by directly hiring unemployed tradesmen, pavers, welders, carpenters, etc., to rebuild decaying infrastructure. Projects designed to prevent things like the 2007 collapse of the eight-lane bridge on I-35 in Minneapolis, which killed 13 people and injured 145. Projects of this sort are not “make work.” They are investments that are sorely needed. Why not get them done now when aggregate demand needs the boost. Those newly employed folks would have money to spend on other goods and services, directly increasing aggregate demand in a manner that would ripple throughout the economy. With the long bond at 2.5%, we could finance this at roughly zero “real” borrowing cost. But these things did not impress my neighbors one bit. “Times are hard,” they said. “Coffers are low. Everyone must cut back and save. Government too.” Alas. The Paradox of Thrift is our world now. It is wrapped around our collective ankles like Voldemort’s snake, dragging us back into the ravine we have long been trying to climb out of.
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